US Federal Reserve Chairman Jerome Powell on Friday signaled that he expects the Fed to continue gradually raising interest rates if the US economic expansion remains strong.
Powell added that while annual inflation has risen to near the Fed’s 2 percent target rate, it is not likely to accelerate above that point.
That suggests that he does not foresee a need for the Fed to step up its rate hikes.
Next month, the Fed is widely expected to resume raising rates.
Speaking to the annual meeting of central bankers in Jackson Hole, Wyoming, Powell said that the Fed recognizes the need to strike a careful balance between its mandates of maximizing employment and keeping price increases stable.
A gradual approach to rate hikes is the best way to navigate between the risks of raising rates too fast and “needlessly shortening the expansion,” and moving too slowly and risking an overheated economy.
“My colleagues and I are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market and inflation near 2 percent,” Powell said.
Powell sketched a positive picture of the US economy and said that the Fed’s incremental approach to raising rates has so far succeeded.
“The economy is strong,” he said. “Inflation is near our 2 percent objective and most people who want a job are finding one. We are setting policy to do what monetary policy can do to support continued growth, a strong labor market and inflation near 2 percent.”
At the same time, Powell said that in case of another financial crisis or intensified concern about high inflation, “we will do whatever it takes.”
That echoed a phrase that was used to describe the extraordinary steps that the Fed and other central banks took after the 2008 financial crisis plunged the US and global economies into deep recessions.
Powell made no mention of public criticism from US President Donald Trump, who has said that he is unhappy with the Fed’s rate hikes.
Trump has complained that the Fed’s tightening of credit could threaten the continued strong growth he aims to achieve through the tax cuts enacted late last year, a pullback of regulations and rewriting trade deals to better serve the US.
Although Powell chose not to mention Trump’s criticism, other Fed officials asserted that the president’s complaints about rate hikes would have no effect on their policymaking.
“We have a mandate by law, and we do the best we can to hit the mandate” of maximizing employment and stabilizing prices, St Louis Federal Reserve Bank President James Bullard said on Friday in an interview on CNBC.
In his speech, Powell did not directly address what many analysts see as the most serious threat to the economy: the trade war that Trump has launched with the US’ main trading partners — a conflict that risks depressing US and global economic growth the longer it goes on.
Powell focused his remarks in part on the difficulty that the Fed faces in setting interest-rate policies at a time when the economy seems to be undergoing changes that challenge long-standing beliefs of how low unemployment can fall before it ignites inflationary pressures.
He said there is also much uncertainty over the “neutral” rate of inflation — the point at which the Fed’s policy rate is neither stimulating economic growth nor holding it back.
The Fed’s economic projections, compiled from estimates of all its officials, estimates the current neutral rate at 2.9 percent.
However, Powell said that views on the neutral rate vary widely.
POOR INTERNAL CONTROLS: Insurance Bureau Director-General Shih Chiung-hwa said the company is expected to get back on track while its chairman is suspended The Financial Supervisory Commission (FSC) yesterday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$939,415) for a reckless investment that endangered its solvency, and suspended its chairman Eugene Wu (吳東進) for poor supervision. The penalty is the second-highest in a single case after Nan Shan Life Insurance Co (南山人壽) was fined NT$30 million in September last year and its chairman Du Ying-tzyong (杜英宗) suspended for two years, the commission said. In three rounds of special and regular examinations conducted since last year, the commission found that Shin Kong Life had given too much power to an asset and liability management committee
Sony Corp has cut its estimated Play Station 5 (PS5) production for this fiscal year by 4 million units, down to about 11 million, following production issues with its custom-designed system-on-chip (SOC) for the new console, people familiar with the matter said. The Tokyo-based electronics giant in July boosted orders with suppliers in anticipation of heightened demand for gaming in the holiday season and beyond, as people spend more time at home due to the COVID-19 pandemic. However, the company has come up against manufacturing issues, such as production yields as low as 50 percent for its SOC, which have cut into
HEAVY INVESTMENT: Moody’s affirmed the firm’s ‘Aa3’ rating with a ‘stable’ outlook due to its leading position in the industry and ability to match customer requirements Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue this year is expected to increase about 21 percent to NT$1.29 trillion (US$44.01 billion) from NT$1.07 trillion last year, driven by strong demand for advanced 5-nanometer and 7-nanometer chips mainly used in smartphones and high-performance computing devices, a Moody’s Investors Service report on Wednesday said. TSMC’s rate of revenue growth next year is to increase to 7.5 percent, the ratings agency said. The company, which supplies 5-nanometer chips for Apple Inc’s new iPad series, has introduced the advanced chips ahead of its competitors and gained a significant share of the market for the foundry industry’s
O2O BICYCLE SHOW: The Taiwan Bicycle Show next year is to be online to offline, with forums, audio-visual conferences and livestreaming of the offline events Local bicycle makers expect demand to continue outpacing supply due to orders triggered by the COVID-19 pandemic, with some companies seeing orders back up through next year. “Next year is all full in terms of orders. Our lead time on components is one year,” Giant Manufacturing Co Ltd (巨大機械) chairwoman Bonnie Tu (杜綉珍) told a news conference in Taipei organized by the Taiwan External Trade Development Council (TAITRA) to announce next year’s Taipei Cycle Show. The pandemic has reduced bicycle supplies and increased demand around the world, Robert Wu (吳盈進), chairman of KMC (Kuei Meng) International Inc (桂盟國際), one of the world’s